Volkswagen (VW) is preparing for significant layoffs, with 15,000 employees set to lose their jobs as the company restructures to cope with mounting pressure in the European automotive market. According to leaks from market analyst Jefferies, VW is planning to close several factories in Germany, with the workforce reduction and restructuring expected to cost around €4 billion. This cost will be reflected in VW’s financial results in the final quarter of 2024.
The restructuring plan comes as VW faces stiff competition from Chinese EV makers and American competitor Tesla. Despite efforts to electrify its offerings, VW has struggled to maintain market share as EV sales growth has slowed in Europe. As a result, VW is now taking drastic measures to cut costs and improve competitiveness.
Negotiations with the powerful German union IG Metall are scheduled to begin on September 25, earlier than previously planned. These discussions will focus on the layoffs, factory closures, and potential new working conditions for VW’s 120,000 employees in Germany. Sources suggest that VW may proceed with the closures without needing approval from its supervisory board, which includes employee representatives and has historically blocked such restructuring efforts.
Earlier in September, VW terminated collective agreements that guaranteed employment for German workers until 2029, signaling that the company is now prepared for plant closures. This move has sparked tensions between management and labor representatives, as it marks the first time in Volkswagen’s 87-year history that factory closures are being considered.
According to Jefferies, VW has identified five factories, two or three of which are likely to be closed as part of the restructuring. However, the company faces a difficult path forward if negotiations with unions fail to deliver the necessary improvements in plant competitiveness. There is no alternative plan should these talks break down.
VW's challenges stem from high labor costs, slower-than-expected EV adoption in Europe, and rising competition from Chinese automakers. The upcoming negotiations will be crucial in determining how the company navigates these difficulties while seeking to preserve jobs and avoid further disruptions in its production network.
